Banking

Possession of old 500 & 1000 rupee notes set to become illegal

29.12.2016

The Central Government Cabinet had approved an ordinance in respect of possession of old notes as a penal offence. The Cabinet has approved promulgation of Specified Bank Notes Cessation of Liabilities Ordinance to penalise persons holding banned 500 and 1,000 rupee notes. It will come into force once it gets Presidential assent under Article 123 of the Constitution of India. Once comes into force, it will make possession of a large number of demonetised 1,000 and 500 rupee notes beyond threshold amount a penal offence.

This Ordinance has come after series of rules and regulations came into effect since the demonetization of old 500 & 1000 rupee notes w.e.f. 8th November 2016. The central government has taken a very tough stand on demonetization and has been working to tighten the loopholes in wake of illegal exchange of old banned notes with new notes. Infact, in the month of December 2016, in order to curb the menace of black money in terms of banned notes, the central government also introduced the Taxation Laws (Second Amendment) Bill, 2016 in the Parliament in recent winter session to impose a higher rate of tax and penalty in respect of undisclosed incomes in wake of recent exorbitant cases of undisclosed income post demonetization and a Scheme namely, ‘Taxation and Investment Regime for Pradhan Mantri Garib Kalyan Yojana, 2016’ (PMGKY) has been proposed in the Bill. Therefore, the present ordinance is one in series of steps taken by the government for efficient working of its policy of demonetization.

The ordinance amends Reserve Bank of India Act to provide legislative support for scrapping the demonetised banknotes that are not returned by removing the liability of the government and the central bank on the demonetised high-denomination notes to prevent future litigations. It ordinance provides a limited window for depositing the cancelled notes at select RBI branches until March 31, 2017. As per the ordinance, the possession of demonetised notes will attract a monetary fine of 10,000 rupees or five times the cash held, whichever is higher. The penalty for holding old high value currency in excess of 10 notes may include financial fines and no jail term. However, the old demonetised notes will be allowed only for the purpose of research and numismatics.

Tags : Notes Possession Legality

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